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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
  • If you are not ready to take this test, you can study here.
  • Match each statement with the correct term.
  • Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. Costs of inputs - technology and productivity - taxes/subsidies - producer speculation - price of other goods that could be produced - and number of sellers all influence supply






2. Ed < 1






3. The additional benefit received from the consumption of the next unit of a good or service






4. An economic system based upon the fundamentals of private property - freedom - self-interest - and prices






5. Two goods are consumer substitutes if they provide essentially the same utility to consumers






6. The combination of labor and capital that minimizes total costs for a given production rate. Hire L and K so that MPL / PL = MPK / PK or MPL/MPK = PL/PK






7. Goods that are both rival and excludable. Only one person can consume the good at a time and consumers who do not pay for the good are excluded from consumption






8. Entry of new firms shifts the cost curves for all firms downward






9. Measures the cost the firm incurs from using an additional unit of input. In a perfectly competitive labor market - MRC = Wage. In a monopsony labor market - the MRC > Wage






10. A legal maximum price above which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent shortage






11. Holding all else equal - when the price of a good rises - consumers decrease their quantity demanded for that good






12. Excess demand; a shortage exists at a market price when the quantity demanded exceeds the quantity supplied






13. Exists if a producer can produce a good at lower opportunity cost than all other producers






14. Pmc < MR = MC and Pmc > minimum ATC so outcome is not efficient - but profit = 0.






15. The most desirable alternative given up as the result of a decision






16. Holding all else equal - when the price of a good rises - suppliers increase their quantity supplied for that good






17. Another way of saying that firms are earning zero economic profits or a fair rate of return on invested resources






18. Exists when the production of a good creates utility for third parties not directly involved in the consumption of production of the good






19. Measures the value of what the next unit of a resource (e.g. - labor) brings to the firm. MRPL = MR x MPL. In a perfectly competitive product market - MRPL = P x MPL. In a monopoly product market - MR < P so MRPm < MRPc.






20. A market structure characterized by a few small firms producing a differentiated product with easy entry into the market






21. Entry of new firms shifts the cost curves for all firms upward






22. A firm that has market power in the factor market (a wage-setter)






23. Substitutes - cost as percentage of income - and time to adjust to price changes all influence price elasticity






24. Two goods are consumer complements if they provide more utility when consumed together than when consumed separately






25. Ei > 1






26. Exists if a producer can produce more of a good than all other producers






27. The rational decision maker chooses an action if MB = MC






28. The change in quantity demanded that results from a change in the consumer's purchasing power (or real income)






29. Demand for a resource like labor is derived from the demand for the goods produced by the resource






30. A good for which higher income decreases demand






31. A group of firms that agree not to compete with each other on the basis of price - production - or other competitive dimensions. Cartel members operate as a monopolist to maximize their joint profits






32. Characterized by many small price-taking firms producing a standardized product in an industry in which there are no barriers to entry or exit






33. Production inputs that the firm can adjust in the short run to meet changes in demand for their output. Often this is labor and/or raw materials






34. The proportion of the tax paid by the consumers in the form of a higher price for the taxed good is greater if demand for the good is inelastic and supply is elastic






35. Indirect - non-purchased - or opportunity costs of resources provided by the entrepreneur






36. The lost net benefit to society caused by a movement away from the competitive market equilibrium






37. Entry (or exit) of firms does not shift the cost curves of firms in the industry






38. Pm > MR = MC - which is not allocatively efficient and dead weight loss exists. Pm > ATC - which is not productively efficient. Profit > 0 so consumer surplus is transferred to the monopolist as profit






39. Costs that do not vary with changes in short-run output. They must be paid even when output is zero.






40. The case where economies of scale are so extensive that it is less costly for one firm to supply the entire range of demand






41. A period of time too short to change the size of the plant - but many other - more variable resources can be changed to meet demand






42. The price of a good measured in units of currency






43. Production of maximum output for a given level of technology and resources. All points on the PPF are productively efficient






44. A per unit tax on production results in a vertical shift in the supply curve by the amount of the tax






45. Exists when the production of a good imposes disutility upon third parties not directly involved in the consumption or production of the good






46. The more of a good that is produced - the greater the opportunity cost of producing the next unit of that good






47. The difference between total revenue and total explicit costs






48. The marginal utility from consumption of more and more of that item falls over time






49. In the case of a public good - some members of the community know that they can consume the public good while others provide for it. This results in a lack of private funding and forces the government to provide it






50. The rate paid on the last dollar earned. This is found by taking the ratio of the change in taxes divided by the change in income